Equity and Trusts

Common Law

• rigid rules

• rights in rem (against the world)

• focuses on the official owner

Equity

• focus on fairness and flexibility

• works alongside CL as a supplement not a replacement

• Abides by common law but steps in when following CL would lead to an unfair outcome

• Rights in personam (against a specific person) not directly to the property

• e.g Promissory estoppel stops someone from going back on a promise when it would be unfair to do so even if theres no formal contract

Key act quote?

Senior Courts Act 1981 s.49 (1)

“whenever there is any conflict…between the rules of equity and the rules of common law…the rules of equity shall prevail”

Specific Performance

• equitable remedy that forces someone to do what they promised in a contract

• used when money wouldn’t be enough to fix the problem

• e.g. every piece of land is unique so money isn’t enough

Injunction

• court order telling someone to either stop doing something - prohibitory injunction (stop trespassing on someone’s land)

• or to do something - mandatory injunction (Remove a structure built on someone else’s land)

Equitable maxims

Equity follows the law

doesn’t ignore/replace legal rules but works alongside them only intervening where strict law would lead to unfairness

Equity looks to the substance rather than the form

cares about what was meant, not strict technical wording or formalities

Equity acts in personam

Equity’s orders are against the person, not the property (e.g., injunctions, specific performance).

Those who comes to equity must come with clean hands

You must be innocent of wrongdoing in the case you’re asking help for 

He who seeks equity must do equity

To receive fairness, you must also act fairly in return and fulfil your own obligations

Equity will not suffer a wrong without a remedy

If common law gives no remedy to a wrong, equity will try to provide one. 

Equity assists the diligent

If you delay too long in asserting your rights, equity may refuse to help.

Equity is equality

Equity tries to divide and treat fairly, especially where rights are shared (e.g 2 ppl contribute equally to a property = equity presumes equal ownership)

Equity treats as done that which ought to be done

If someone has agreed/ legally bound to do something, equity may treat it as already done (Walsh v Lonsdale 1882)

Equity will not perfect an imperfect gift

If a gift hasn’t been legally completed, e.g. the transfer wasn’t done properly, equity won’t fix it. (Milroy v Lord (1862))

Where the equities are equal, the law prevails

If both parties have equally fair or unfair clams the courts will follow the CL outcome  (legal ownership)

Equity imputes an intention to fulfil an obligation

If someone is under a duty and does something that could satisfy it, equity assumes they meant to do so. (e.g if ur supposed to pay off a debt and u make a payment equity assumes its to the debt)

Where the equities are equal, the first in time prevails

If two people have competing equitable interests, the one created first takes priority

Equity won’t permit a statute to be used as an instrument of fraud

A person can’t rely on strict legal rights under a statute if doing so would be dishonest or unfair (e.g. If someone hides behind legal formalities to defraud another, equity will intervene)

Equity will not assist a volunteer

If you gave no consideration (gifted something with nothing required in return), equity usually won’t help you enforce a promise.

Milroy v Lord (1862)

• Equity will not perfect an imperfect gift / Equity will not assist a volunteer

• Donor intended to transfer shares to claimant but did not complete the necessary steps.

• The gift was not properly executed.

• Held: Equity would not “fix” or complete the gift.

• The claimant was a volunteer (gave no consideration).

• Significance: If you want to make a gift, you must do everything required to transfer it.
  Equity will not step in to complete an incomplete gift.

Tenancy at will

• A temporary and unstable tenancy.

• No fixed duration.

• Can be ended at any moment by either side.

• Often arises when the parties intended to create a formal lease, but formalities were not completed (e.g., Walsh v Lonsdale situation before equity steps in).

e.g. if a landlord says “You can stay here for now, we’ll sort the paperwork later.”

→ The tenant has a tenancy at will until the formal lease is completed.

Walsh v Lonsdale (1882)

• Equity treats as done that which ought to be done

• At law: only a tenancy at will existed.

• But there was a valid contract to grant the lease.

• Held: Equity treated the lease as if it had been properly created.

• Result → Equitable lease enforceable.

• Significance: Shows equity can recognise interests even when legal formalities are missing, if there is a specifically enforceable agreement.

Equity’s Darling

• A person who buys land fairly, pays real value (money, goods, etc) it can’t be a gift, and did not know about anyone else’s equitable right.

• If they meet those conditions → they are protected.

• So any equitable right (like someone’s fair share of a house) cannot be enforced against them.

What’s a Trust

A split in ownership where the trustee holds legal title and the beneficiary holds equitable (fair) ownership.

Trustee?

Holds legal title and manages the property

Beneficiary?

Has the equitable right to benefit from the property.

Express Trust?

A trust intentionally created (e.g., written in a will or deed).

Resulting Trust?

When someone provides the money for property but the property is put in someone else’s name, not as a gift as they expect a share/benefit in return.

The law assumes that when someone contributes to the purchase price without intending a gift, they should receive an equitable share, which is protected through a resulting trust.

Constructive Trust?

A trust imposed by the court where fairness requires someone to get a share (e.g., someone contributed to the home).

Statutory Trust?

A trust arising automatically under law, especially in co-owned homes (TOLATA 1996).